Stronger institutions, fiscal consolidation needed to boost economy: CBK Governor

March 28, 2018
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NAIROBI, Kenya, Mar 28 – Central Bank Governor Dr. Patrick Njoroge has said Kenya needs a stable macroeconomic environment and strong institutions to rebound from the 2017 economic slump that was caused by drought and a prolonged electioneering period.

In an interview with CNN’s Richard Quest, Njoroge says fiscal consolidation is needed to realign revenue and expenditure.

“I would say consolidation, not austerity because there is still scope for reducing expenditure and increasing revenue. This will balance the economy appropriately,” Njoroge told Quest.

Faced by a costly 2017 election, a biting drought, and missed revenue targets as a result of a slowdown in economic activity, the National Treasury announced cost-cutting measures late 2017 including reducing budget allocations in key state departments.

Njoroge’s phrasing is in contrast with the National Treasury Cabinet Secretary Henry Rotich who said the austerity measures would reduce the fiscal deficit and put the economy on a path to recovery.

“Before we release funds to the ministries, we will be going into details, looking at those expenditures whether they are very necessary or not,” said Rotich in a statement posted on the Treasury website.

In addition to fiscal consolidation, the CBK Governor has said that there is still room to improve the business environment which will allow the private sector to thrive.

“There needs to be predictability in things like licensing…you know what needs to be done if you have to pay a fine, so this is key,” Njoroge said, adding that Kenya is now running more on the vibrancy of the private sector than public spending.

The Central Bank has projected the economy to grow by 6.2 percent in 2018-2019 compared to 5 percent in 2017.

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